NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed MGM Resorts International's (MGM) Issuer
Default Rating (IDR) at 'B-' and MGM Grand Paradise, S.A.'s (MGM Grand
Paradise) IDR at 'B+'. Fitch also affirms all of MGM's and MGM Grand
Paradise's transaction ratings, which are listed at the end of the
release. The Rating Outlook is revised to Positive from Stable.

The Outlook revision to Positive reflects:

--Fitch's continued positive outlook on Las Vegas Strip fundamentals
over the next couple of years, despite some recent demand weakness which
has tempered the outlook somewhat;

The above considerations should improve MGM's credit profile in terms of
liquidity, FCF and leverage to be more consistent with a 'B' IDR over
the next several quarters. Given MGM's size, market exposure and
expressed interest in improving its balance sheet, MGM's credit profile
improvement could result in continued migration up the rating spectrum
over the next few years. The pace and extent of the migration largely
depends on management's willingness to support its credit profile while
pursuing potential growth opportunities.

Credit concerns that constrain upward movement in the ratings in the
near term include MGM's high leverage, weak albeit improving FCF, a
maturity wall that remains formidable past 2014 and a thin cushion
relative to its primary credit facility covenant. These negative
considerations leave MGM's credit profile vulnerable to weak downside
scenarios, as it remains highly sensitive to a downturn in the broader
economy, the Las Vegas Strip, and/or capital market conditions.

An upgrade of MGM's IDR to 'B' could occur over the next several
quarters if:

Fitch anticipates improvement in the domestic group's FCF profile,
continued Macau dividends, and/or the use of cash on hand to pay-down
near-term maturities to aid MGM's de-leveraging. Fitch forecasts MGM's
domestic leverage and consolidated leverage (adjusted for minority
interest) to improve to around 10x and 7.5x by year-end 2013,
respectively, and 8x and 7x by year-end 2014. This compares to domestic
and consolidated leverage as of June 30, 2012 of roughly 10.8x and 8.1x,
respectively. At the 'B-' IDR, MGM's FCF and ability to address upcoming
maturities remain primary rating drivers, but leverage will become an
increasingly important consideration in the ratings as the overall
credit quality improves.

The reported covenant EBITDA for the LTM period ending June 30, 2012 is
$1.3 billion relative to a covenant threshold of $1.20 billion for the
period. The covenant steps up to $1.25 billion in March 2013 and $1.30
billion in June 2013. The Macau dividend received by the domestic group
is counted in the covenant EBITDA, providing MGM a degree of flexibility
with respect to the covenant.

Upcoming Maturities and Liquidity

MGM executed several transactions this year that improved the company's
maturity profile without adversely affecting its interest burden, unlike
other lower rated gaming issuers such as Caesars Entertainment Corp.
(rated with an IDR of 'CCC'; Negative Outlook by Fitch) and Boyd Gaming
(IDR of 'B'; Negative Outlook).

Pro forma for repayment of the 6.75% notes that matured in September
2012 and the September $1 billion note issuance, MGM's domestic
restricted group has $2.0 billion in liquidity ($1.8 billion excluding
non-extended revolver availability).

MGM has $1.4 billion of maturities in 2013, including $750 million in
13% New York-New York secured notes (notes also have pro rata security
in Bellagio, MGM Grand and Mirage). There is $1.3 billion of debt
maturing in 2014, half of which are the 10.375% Bellagio/Mirage secured
notes.

In May 2013, MGM will be able to call its 10.125% secured notes due 2017
at a premium of 105.563, which could save the company approximately $15
million-$30 million assuming a 7%-9% coupon.

Refinancing maturities that are beyond 2015 are limited to $500 million
as per credit agreement covenants but Fitch believes there is good
chance that MGM will amend its credit facility sometime in 2013 or 2014
in conjunction with the maturity/refinance of the 2013-2017 secured
notes. The collateral released by the paydown of the secured notes could
be pledged to the credit facility in an effort to improve pricing.

Free Cash Flow

The domestic group's FCF for the LTM period ending June 30, 2012 was
roughly negative $185 million, which includes $387 million of capex, the
bulk of which is related to room remodels at Bellagio ($70 million) and
MGM Grand ($160 million). Excluding these room remodels and including
Macau dividends (which Fitch believes will be recurring), domestic LTM
discretionary FCF is closer to positive $200 million (or breakeven
without the dividends).

Fitch believes that MGM Grand Paradise has the ability to continue to
pay meaningful dividends despite the planned Cotai development ($2.5
billion budget). Dividends will be supported by MGM Macau's robust
discretionary FCF ($674 million for LTM period ending June 30, 2012),
existing cash on hand (excess cash is around $500 million), and
anticipated proceeds from a new upsized credit facility.

Domestic capex is expected to moderate somewhat but remain elevated as
MGM announced a $40 million remodel at Bellagio's newer Spa Tower and a
remodel of the rooms at THEhotel tower at Mandalay Bay. (The budget for
THEhotel is undisclosed but Fitch estimates MGM spending at about $35
million-$40 million). Full-year 2012 domestic capex will be about $320
million and Fitch estimates 2013 domestic capex in the $250 million-$300
million range.

MGM's domestic FCF will also improve as a result of continued EBITDA
recovery, which began about two years ago for MGM. About 78% of
wholly-owned property EBITDA is generated on the Las Vegas Strip. Fitch
expects domestic FCF to be breakeven to slightly positive in 2013 and
improve to exceed $200 million starting 2014. Improvement in the outer
years includes interest expense reductions largely stemming from
maturities/refinancings of high-coupon secured notes in 2013 and 2014.

Las Vegas Outlook

Fitch believes the fundamental outlook for the Las Vegas Strip remains
among the safest markets in the U.S. for the balance of 2012 and 2013,
supported by minimal supply growth for the foreseeable future. With its
recently completed/planned room remodels at Bellagio, MGM Grand and
Mandalay Bay, MGM should benefit from the attractive supply/demand
outlook on the Strip over the next couple of years.

The Las Vegas Strip recovery trajectory slowed materially in second
quarter 2012, and forward trends softened as the shorter-term
group/business segment (i.e. in the year, for the year) weakened.
Visitation is up 1.8% year-to-date through August, while gaming revenues
are up 2.6% on the Las VagasStrip. Fitch currently anticipates
visitation and revenue growth in 2013 to be similar to 2012.

Potential Project Pipeline

Aside from MGM's Cotai project mentioned earlier, MGM is pursuing
developments at National Harbor (right outside Washington DC) and in
Springfield, MA, with each development budgeted at $800 million. In
Toronto, MGM is proposing a multi-billion casino resort.

All of these projects have significant regulatory/licensing hurdles to
overcome:

--In Massachusetts, the bidding process for the state's western-region
gaming license is very contentious with at least four other bidders in
the mix including Penn National Gaming, Ameristar Casinos, Mohegan
Tribal Gaming Authority and Seminole Hard Rock Entertainment.

--Maryland (National Harbor) hinges on the recently passed legislation
that would allow a casino in Prince George's County passing a referendum
in November. Penn National Gaming, whose Charles Town, WV, racino would
be negatively affected if the referendum passes, is allocating
considerable resources to combat the measure.

--Ontario Lottery and Gaming Corp's plans to revamp the province's
gaming regulations, which may allow a casino in the Toronto area. The
city of Toronto is still contemplating whether it wants a major casino,
and other parties expressed interest including Las Vegas Sands and
Caesars.

Given MGM's somewhat constrained financial profile and restrictions
imposed by the domestic credit agreement, Fitch believes that the
projects outside of Macau will be done through project finance
arrangements, possibly with other financial partners. However, there is
a meaningful chance that MGM will refinance/amend its credit facility in
the near term and include these projects in its main restricted group.

There are no cross-default provisions between MGM and MGM Grand
Paradise, but MGM has control with respect to MGM China's dividend
policy. MGM Grand Paradise's current credit agreement permits the Macau
subsidiary to pay unlimited dividends as long as gross leverage is less
than 3.5x (current leverage is less than 1x) and permits more limited
dividends if leverage is at or less than 4.0x. The 'B+' IDR reflects the
risk that MGM Grand Paradise may opt to leverage up to 3.5x or higher to
support the weaker parent company. These covenants may be revised, as
the company is currently pursuing a new credit facility for MGM Grand
Paradise.

The Positive Outlook on MGM Grand Paradise reflects MGM's improving
credit profile, which reduces the risk that MGM Grand Paradise will be
relied on to support the domestic credit group. If Fitch upgrades MGM's
IDR to 'B', it will also upgrade MGM Grand Paradise to 'BB-', which is
more in-line with MGM Grand Paradise's stand-alone credit profile. Fitch
expected MGM Grand Paradise to seek a larger facility to accommodate its
Cotai project and believes leverage will remain at or below 3x through
the development cycle with ample capacity to upstream cash flow to MGM
and minority shareholders.

Fitch estimates full recovery in an event of default for MGM's secured
notes resulting in a rating of 'BB-/RR1' and a three-notch positive
differential relative to the 'B-' IDR.

MGM's credit facility is partially secured by Beau Rivage, Gold Strike
Tunica, and the land on the Las Vegas Strip across from the Luxor. MGM
Grand Detroit is a co-borrower on the credit facility and secured it to
the extent it draws on the facility ($450 million as of June 30, 2012).
Fitch estimates a recovery in 51%-70% range for the facility, which
results in a 'B/RR3' and a one-notch positive differential relative to
the 'B-' IDR.

Fitch estimates average recovery prospects in the 31%-50% range for the
unsecured notes resulting in no notching from the 'B-' IDR.

Fitch expects that MGM's subordinate notes due 2013 will mature before
any reasonable default scenario can occur, but assigns a 'CCC/RR6'
(two-notch negative differential) to the notes to account for the notes'
subordination.

There is a high probability that Fitch will upgrade the credit facility
(and possibly the unsecured notes) as MGM's secured notes mature or are
called, which would result in improved recovery prospects for the
balance of the capital structure. Approximately $3.1 billion in notes
secured by New York-New York, Bellagio, Mirage and MGM Grand become due
or are callable by 2014.

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